With an LLC do you use commercial lending?

[Emily Debes]

I'm considering getting an LLC to start real estate investing, and I feel like I read somewhere that under an LLC you would need to qualify for commercial lending. How easy is that to qualify for commercial lending with a brand-new LLC? Would you encourage that? I am brand-new, and want to buy a triplex.

[Nathan Click]

@Emily Debes I am a commercial broker and financing consultant, I deal only in Commercial Financing, this means exclusively with business entities (i.e. LLCs). To answer your question about qualifying with a brand new LLC, I can tell you that time in business is not a factor many LLCs are created just prior to the transaction and are special purpose entities (SPE). Being new on paper is not an issue. I would worry about only 3 things if I were you.

CASH - Unlike residential loans we don't care about W-2 income but you need money to put down, plan for about 25% for a buy and hold 15% for a fix and flip.  

CREDIT -  Yes it is a business loan but you still need to personally guarantee it in most cases.  Looking for FICO scores of about 600+

COLLATERAL - This is the property generally so long as it appraises for what you expect we are going to be OK. Again the lender will usually do 75% LTV

As long as the three C's check out chances are you can qualify. Now to your question about would I encourage the LLC; I would but, I am bias as I do not deal in the residential lending space. Commercial loans are more flexible, give you more options as to what you can buy, and in my opinion generally easier to get done, but they have higher rates anywhere from 5% to 8% for soft money and 9% to 14% for hard money. It really depends on what your strategy is and how you want to grow your investments.